Priority Technology Holdings, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Consolidated Financial Statements and related Notes and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Certain amounts in this section may not add mathematically due to rounding. Cautionary Note Regarding Forward-looking Statements Some of the statements made in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our management's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: • negative economic and political conditions that adversely affect the general economy, consumer confidence and consumer and commercial spending habits, which may, among other things, negatively impact our business, financial condition and results of operations; • competition in the payment processing industry; • the use of distribution partners; • any unauthorized disclosures of merchant or cardholder data, whether through breach of our computer systems, computer viruses or otherwise; • any breakdowns in our processing systems; • government regulation, including regulation of consumer information; • the use of third-party vendors; • any changes in card association and debit network fees or products; • any failure to comply with the rules established by payment networks or standards established by third-party processors; • any proposed acquisitions or dispositions or any risks associated with completed acquisitions or dispositions; and • other risks and uncertainties set forth in the " Item 1A - Risk Factors " section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of 28 which are beyond our control) or other assumptions, including the risk factors set forth in the " Item 1A - Risk Factors " section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K, that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Terms Used in this Quarterly Report on Form 10-Q As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the terms "Company," "Priority," "we," "us" and "our" refer to Priority Technology Holdings, Inc. and its consolidated subsidiaries. Results of Operations This section includes certain components of our results of operations for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024. We have derived this data, except the key indicators, from our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. Revenues For the three months ended June 30, 2025, our consolidated revenue of $239.8 million increased by $19.9 million, or 9.1%, from $219.9 million for the three months ended June 30, 2024. This overall increase was mainly driven by increase in merchant bankcard dollar value and total card dollar value processed in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and, an increase in incentive income and, increased processing volume in our B2B Payments Segment, which was partially offset by a decrease in issuing volume. For the six months ended June 30, 2025, our consolidated revenue of $464.4 million increased by $38.9 million, or 9.1%, from $425.6 million for the six months ended June 30, 2024. This overall increase was mainly driven by increase in merchant bankcard dollar value and total card dollar value processed in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and, an increase in incentive income and, increased processing volume in our B2B Payments Segment, which was partially offset by a decrease in issuing volume. 29 The following table presents our revenues by type: (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 $ Change 2025 2024 $ Change Revenue Type: Merchant card fees $ 180,483 $ 169,246 $ 11,237 $ 347,562 $ 327,193 $ 20,369 Money transmission services 39,273 31,340 7,933 76,722 60,484 16,238 Outsourced services and other services 16,853 16,256 597 33,855 31,921 1,934 Equipment 3,203 3,025 178 6,303 5,988 315 Total revenues $ 239,812 $ 219,867 $ 19,945 $ 464,442 $ 425,586 $ 38,856 Merchant card fees Merchant card fees revenue for the three months ended June 30, 2025 was $180.5 million an increase of $11.2 million or 6.6%, from $169.2 million for the three months ended June 30, 2024. The increase was primarily driven by an increase in merchant bankcard value, total card value, and the transaction count processed by the Company. Merchant card fees revenue for the six months ended June 30, 2025 was $347.6 million an increase of $20.4 million or 6.2%, from $327.2 million for the six months ended June 30, 2024. The increase was primarily driven by an increase in merchant bankcard value, total card value, and the transaction count processed by the Company. Money transmission services Money transmission services for the three months ended June 30, 2025 was $39.3 million, an increase of $7.9 million, or 25.3%, from $31.3 million for the three months ended June 30, 2024. This increase was primarily driven by an increase in new customer enrollments and average billed clients. Money transmission services for the six months ended June 30, 2025 was $76.7 million, an increase of $16.2 million, or 26.8%, from $60.5 million for the six months ended June 30, 2024. This increase was primarily driven by an increase in new customer enrollments and average billed clients. Outsourced services and other services revenue Outsourced services and other services revenue of $16.9 million for the three months ended June 30, 2025 increased by $0.6 million, or 3.7%, from $16.3 million for the three months ended June 30, 2024, primarily due to growth in interest income due to higher balances of permissible investments offset by reduction in interest rates. Outsourced services and other services revenue of $33.9 million for the six months ended June 30, 2025 increased by $1.9 million, or 6.1%, from $31.9 million for the six months ended June 30, 2024, primarily due to growth in interest income due to higher balances of permissible investments offset by reduction in interest rates. Equipment Equipment revenue of $3.2 million for the three months ended June 30, 2025 increased by $0.2 million, or 5.9% from $3.0 million for the three months ended June 30, 2024. The increase was primarily due to increased sales of point-of-sale equipment. Equipment revenue of $6.3 million for the six months ended June 30, 2025 increased by $0.3 million, or 5.3% from $6.0 million for the six months ended June 30, 2024. The increase was primarily due to increased sales of point-of-sale equipment. 30 Operating expenses were as follows: (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 $ Change 2025 2024 $ Change Operating expenses Cost of revenue (excludes depreciation and amortization) $ 147,399 $ 138,118 $ 9,281 $ 284,752 $ 267,416 $ 17,336 Salary and employee benefits 27,060 22,119 4,941 52,835 44,269 8,566 Depreciation and amortization 14,093 15,244 (1,151) 27,870 30,497 (2,627) Selling, general and administrative 13,910 11,212 2,698 29,010 22,207 6,803 Total operating expenses $ 202,462 $ 186,693 $ 15,769 $ 394,467 $ 364,389 $ 30,078 Cost of revenue (excludes depreciation and amortization) Cost of revenue (excludes depreciation and amortization) of $147.4 million for the three months ended June 30, 2025 increased by $9.3 million, or 6.7%, from $138.1 million for the three months ended June 30, 2024, primarily due to the corresponding increase in revenues. Cost of revenue (excludes depreciation and amortization) of $284.8 million for the six months ended June 30, 2025 increased by $17.3 million, or 6.5%, from $267.4 million for the six months ended June 30, 2024, primarily due to the corresponding increase in revenues offset by recovery of certain bad debts. Salary and employee benefits Salary and employee benefits expense of $27.1 million for the three months ended June 30, 2025 increased by $4.9 million, or 22.3%, from $22.1 million for the three months ended June 30, 2024, primarily due to merit increases, increased headcount to support overall growth of the Company and from the acquisition of the Letus business, and increased stock based compensation related to long term incentive awards to executives. Salary and employee benefits expense of $52.8 million for the six months ended June 30, 2025 increased by $8.6 million, or 19.3%, from $44.3 million for the six months ended June 30, 2024, primarily due to merit increases, increased headcount to support overall growth of the Company and from the acquisition of the Letus business, and increased stock based compensation related to long term incentive awards to executives. Depreciation and amortization expense Depreciation and amortization expense of $14.1 million for the three months ended June 30, 2025 decreased by $1.2 million, or 7.6%, from $15.2 million for the three months ended June 30, 2024, primarily due to full amortization of certain intangible assets. Depreciation and amortization expense of $27.9 million for the six months ended June 30, 2025 decreased by $2.6 million, or 8.6%, from $30.5 million for the six months ended June 30, 2024, primarily due to full amortization of certain intangible assets. Selling, general and administrative Selling, general and administrative expenses of $13.9 million for the three months ended June 30, 2025 increased by $2.7 million, or 24.1%, from $11.2 million for the three months ended June 30, 2024, primarily due to increase in professional charges related to SOX compliance and increased marketing and software expenses to support overall growth. Selling, general and administrative expenses of $29.0 million for the six months ended June 30, 2025 increased by $6.8 million, or 30.6%, from $22.2 million for the six months ended June 30, 2024, primarily due to increase in professional charges related to SOX compliance, increased marketing and software expenses to support overall growth, and legal expenses related to the Company's secondary offering of common shares and the Letus business acquisition. 31 Other Expense, net Other expense, net were as follows: (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 $ Change 2025 2024 $ Change Other (expense) income Interest expense $ (23,054) $ (21,710) $ (1,344) $ (46,230) $ (42,590) $ (3,640) Debt extinguishment and modification costs — (8,623) 8,623 (38) (8,623) 8,585 Other income, net 1,006 668 338 2,113 1,300 813 Total other expense, net $ (22,048) $ (29,665) $ 7,617 $ (44,155) $ (49,913) $ 5,758 Interest expense Interest expense of $23.1 million for the three months ended June 30, 2025 increased by $1.3 million, or 6.2%, from $21.7 million for the three months ended June 30, 2024, due to increased outstanding balance of the term loan facility used for the redemption of redeemable senior preferred stock, offset by decrease in interest rates. Interest expense of $46.2 million for the six months ended June 30, 2025 increased by $3.6 million, or 8.5%, from $42.6 million for the six months ended June 30, 2024, due to increased outstanding balance of the term loan facility used for the redemption of redeemable senior preferred stock, offset by decrease in interest rates. Income tax (benefit) expense Income tax expense was as follows: (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 $ Change 2025 2024 $ Change Income before income taxes $ 15,302 $ 3,509 $ 11,793 $ 25,820 $ 11,284 $ 14,536 Income tax expense $ 4,423 $ 2,515 $ 1,908 $ 6,673 $ 5,097 $ 1,576 Effective tax rate 28.9 % 71.7 % 25.8 % 45.2 % We compute our interim period income tax expense or benefit by using a forecasted EAETR and adjust for any discrete items arising during the interim period and any changes in our projected full-year business interest expense and taxable income. The EAETR for 2025 is 28.9% and includes the income tax provision on pre-tax income and a tax provision related to the establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2025 interest expense. The effective tax rate for 2025 changed primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets. Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under GAAP and the U.S. tax code. The consolidated effective income tax rate for 2025 may not be indicative of our effective tax rate for future periods. On July 4, 2025, the U.S. government enacted legislation know as the One Big Beautiful Bill Act into law. The OBBBA, among other provisions, extends or reinstates certain provisions of the 2017 Tax Cuts and Jobs Act (TCJA), including but not limited to, 100% bonus depreciation on eligible property, immediate expensing of domestic research and development costs, and the restoration of an EBITDA based interest expense limitation calculation. We are in the process of evaluating the provisions of the OBBBA, and their impact on the Company's financial statements. 32 Segment Results The CODM's review of segment performance and allocation of resources are based on Adjusted EBITDA (a non-GAAP financial measure). Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding depreciation and amortization) and operating expenses that are directly related those revenues. Operating overhead and shared costs are managed centrally and included in corporate segment. This non-GAAP financial measure helps to illustrate the underlying financial and business trends relating to results of operations of the Company and therefore used as a measure of segment profit or loss for the purposes of evaluation of segment performance and allocation of resources. SMB Payments (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change 2025 2024 Change Revenues $ 163,230 $ 155,101 $ 8,129 $ 314,920 $ 299,105 $ 15,815 Adjusted EBITDA $ 27,749 $ 28,597 $ (848) $ 53,454 $ 53,620 $ (166) Key Indicators: Merchant bankcard processing dollar value $ 16,150,363 $ 15,801,626 $ 348,737 $ 31,444,496 $ 30,579,730 $ 864,766 Merchant bankcard transaction count 205,530 193,841 11,689 391,068 369,069 21,999 Total card processing dollar value $ 18,667,898 $ 18,253,900 $ 413,998 $ 36,353,389 $ 35,352,661 $ 1,000,728 Revenues Revenue from our SMB Payments segment was $163.2 million for the three months ended June 30, 2025, compared to $155.1 million for the three months ended June 30, 2024. The increase of $8.1 million, or 5.2%, was primarily driven by an increase in merchant card fee rate, increased card processing dollar value, and transaction count increases. The Company's merchant card fee revenue from the SMB Payments segment ($158.8 million for the three months ended June 30, 2025 and $150.7 million for the three months ended June 30, 2024) as a percentage of total card processing dollar value during the three months ended June 30, 2025 increased to 0.85% from 0.83% as compared to the three months ended June 30, 2024. Revenue from our SMB Payments segment was $314.9 million for the six months ended June 30, 2025, compared to $299.1 million for the six months ended June 30, 2024. The increase of $15.8 million, or 5.3%, was primarily driven by an increase in merchant card fee rate, increased card processing dollar value, and transaction count increases. The Company's merchant card fee revenue from the SMB Payments segment ($306.3 million for the six months ended June 30, 2025 and $290.5 million for the six months ended June 30, 2024) as a percentage of total card processing dollar value during the six months ended June 30, 2025 increased to 0.84% from 0.82% as compared to the six months ended June 30, 2024. Adjusted EBITDA Adjusted EBITDA from our SMB Payments segment was $27.7 million for the three months ended June 30, 2025, compared to $28.6 million for the three months ended June 30, 2024. The decrease of $0.8 million, or 3.0% was primarily driven by an increase in revenue, offset by mix related margin compression and other operating expenses. Adjusted EBITDA from our SMB Payments segment was $53.5 million for the six months ended June 30, 2025, compared to $53.6 million for the six months ended June 30, 2024. The decrease of $0.2 million, or 0.3% was primarily driven by an increase in revenue, and recovery of certain chargeback losses, offset by mix related margin compression and other operating expenses. 33 B2B Payments (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change 2025 2024 Change Revenues $ 25,033 $ 21,881 $ 3,152 $ 48,951 $ 43,225 $ 5,726 Adjusted EBITDA $ 3,770 $ 1,530 $ 2,240 $ 7,286 $ 3,276 $ 4,010 Key Indicators: B2B issuing dollar volume $ 220,227 $ 249,454 $ (29,227) $ 457,517 $ 477,266 $ (19,749) B2B issuing transaction count 223 242 (19) 434 482 (48) Revenues Revenue from our B2B Payments segment was $25.0 million for the three months ended June 30, 2025, compared to $21.9 million for the three months ended June 30, 2024. The increase of $3.2 million, or 14.4% was primarily driven by increases in total card volume processed and certain incentive income offset by decreases in issuing dollar volume and issuing transaction count. Revenue from our B2B Payments segment was $49.0 million for the six months ended June 30, 2025, compared to $43.2 million for the six months ended June 30, 2024. The increase of $5.7 million, or 13.2% was primarily driven by increases in total card volume processed and certain incentive income offset by decreases in issuing dollar volume and issuing transaction count. Adjusted EBITDA Adjusted EBITDA from our B2B Payments segment of $3.8 million for the three months ended June 30, 2025, compared to $1.5 million for the three months ended June 30, 2024.The increase in Adjusted EBITDA of $2.2 million or 146.4% was contributed by $0.9 million in the supplier funded business (driven by incentive income) and $1.3 million in the buyer funded business (driven by increased processing volume). Adjusted EBITDA from our B2B Payments segment of $7.3 million for the six months ended June 30, 2025, compared to $3.3 million for the six months ended June 30, 2024.The increase in Adjusted EBITDA of $4.0 million or 122.4% was contributed by $1.4 million in the supplier funded business (driven by incentive income) and $2.6 million in the buyer funded business (driven by increased processing volume). Enterprise Payments (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change 2025 2024 Change Revenues $ 52,658 $ 43,670 $ 8,988 $ 102,746 $ 84,660 $ 18,086 Adjusted EBITDA $ 45,558 $ 37,244 $ 8,314 $ 88,001 $ 71,971 $ 16,030 Key Indicators: Average CFTPay billed clients 992,279 762,873 229,406 966,371 733,380 232,991 Average CFTPay new enrollments 57,818 55,416 2,402 56,882 54,484 2,398 34 Revenues Revenue from our Enterprise Payments segment was $52.7 million for the three months ended June 30, 2025, compared to $43.7 million for the three months ended June 30, 2024. The increase of $9.0 million, or 20.6%, was primarily driven by an increase in billed clients and new customer enrollments, the addition of new integrated partners, acquisition of the Letus business, and growth in interest income due to higher balances of permissible investments offset by reduction in interest rates. Revenue from our Enterprise Payments segment was $102.7 million for the six months ended June 30, 2025, compared to $84.7 million for the six months ended June 30, 2024. The increase of $18.1 million, or 21.4%, was primarily driven by an increase in billed clients and new customer enrollments, the addition of new integrated partners, acquisition of the Letus business, and growth in interest income due to higher balances of permissible investments offset by reduction in interest rates. Adjusted EBITDA Adjusted EBITDA from our Enterprise Payments segment was $45.6 million for the three months ended June 30, 2025, compared to $37.2 million for the three months ended June 30, 2024. The increase of $8.3 million, or 22.3%, was primarily driven by increases in revenues. Adjusted EBITDA from our Enterprise Payments segment was $88.0 million for the six months ended June 30, 2025, compared to $72.0 million for the six months ended June 30, 2024. The increase of $16.0 million, or 22.3%, was primarily driven by increases in revenues. Three Months Ended June 30, 2025 SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 27,749 $ 3,770 $ 45,558 $ (21,027) $ 56,050 Interest expense — (790) (243) (22,021) (23,054) Depreciation and amortization (6,633) (1,262) (4,941) (1,257) (14,093) Selling, general and administrative (non-recurring) — — — (395) (395) Non-cash stock based compensation 5 (84) (33) (3,094) (3,206) Income (loss) before taxes $ 21,121 $ 1,634 $ 40,341 $ (47,794) $ 15,302 Income tax expense (4,423) Net income $ 10,879 Three Months Ended June 30, 2024 SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 28,597 $ 1,530 $ 37,244 $ (15,820) $ 51,551 Interest expense — (1,241) — (20,469) (21,710) Depreciation and amortization (8,541) (1,261) (4,087) (1,355) (15,244) Debt modification and extinguishment expenses — — — (8,623) (8,623) Selling, general and administrative (non-recurring) — — — (636) (636) Non-cash stock based compensation (4) (109) (32) (1,684) (1,829) Income (loss) before taxes $ 20,052 $ (1,081) $ 33,125 $ (48,587) $ 3,509 Income tax expense (2,515) Net income $ 994 35 Six Months Ended June 30, 2025 SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 53,454 $ 7,286 $ 88,001 $ (41,397) $ 107,344 Interest expense — (1,796) (243) (44,191) (46,230) Depreciation and amortization (13,258) (2,523) (9,583) (2,506) (27,870) Debt modification and extinguishment expenses — — — (38) (38) Selling, general and administrative (non-recurring) — — — (2,594) (2,594) Non-cash stock based compensation 1 (168) (65) (4,560) (4,792) Income (loss) before taxes $ 40,197 $ 2,799 $ 78,110 $ (95,286) $ 25,820 Income tax expense (6,673) Net income $ 19,147 Six Months Ended June 30, 2024 SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 53,620 $ 3,276 $ 71,971 $ (30,976) $ 97,891 Interest expense — (2,214) — (40,376) (42,590) Depreciation and amortization (17,127) (2,731) (8,126) (2,513) (30,497) Debt modification and extinguishment expenses — — — (8,623) (8,623) Selling, general and administrative (non-recurring) — — — (1,435) (1,435) Non-cash stock based compensation (8) (227) (65) (3,162) (3,462) Income (loss) before taxes $ 36,485 $ (1,896) $ 63,780 $ (87,085) $ 11,284 Income tax expense (5,097) Net income $ 6,187 36 Critical Accounting Policies and Estimates Our Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to these critical accounting policies and estimates as of June 30, 2025. Liquidity and Capital Resources Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, for technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital and other anticipated needs, including our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit facility are sufficient to meet our working capital requirements for at least the next 12 months. Our principal uses of cash are to fund business operations and administrative costs, and to service our debt. Our working capital, defined as current assets less current liabilities, was $76.7 million at June 30, 2025 and $23.6 million at June 30, 2024. As of June 30, 2025, we had cash totaling $50.6 million compared to $34.6 million at June 30, 2024. These cash balances do not include restricted cash of $14.2 million and $12.6 million at June 30, 2025 and June 30, 2024, respectively, which reflects cash accounts holding customer settlement funds and cash reserves for potential losses. The current portion of long-term debt included in current liabilities was $4.3 million and $8.4 million at June 30, 2025 and June 30, 2024, respectively. At June 30, 2025, we had availability of approximately $70.0 million under our revolving credit facility. The following table and discussion reflect our changes in cash flows for the comparative six month periods. Six Months Ended June 30, (in thousands) 2025 2024 Net cash provided by (used in): Operating activities $ 27,080 $ 42,007 Investing activities (21,145) (20,598) Financing activities 178,091 18,149 Net increase (decrease) in cash and cash equivalents and restricted cash $ 184,026 $ 39,558 Cash Provided by Operating Activities Net cash provided by operating activities was $27.1 million for the six months ended June 30, 2025 compared to $42.0 million for the six months ended June 30, 2024. The $14.9 million decrease was primarily driven by a decrease in interest expense and changes in the operating assets and liabilities. Cash Used in Investing Activities Net cash used in investing activities was $21.1 million and $20.6 million for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025, investing activities included additions to property, equipment and software of $13.0 million, $1.4 million related to net funding of new loans to ISOs, $4.5 million related to the acquisition of a business and $2.3 million investments in unconsolidated entities. For the six months ended June 30, 2024, net cash used in investing activities included additions to property, equipment and software of $11.7 million, $1.4 million related funding of new loans to ISOs and $7.5 million related to the acquisition of intangible assets and an investment in an unconsolidated entity. 37 Cash Provided by Financing Activities Net cash provided by financing activities was $178.1 million for the six months ended June 30, 2025, compared to $18.1 million of cash used in financing activities for the six months ended June 30, 2024. The net cash provided by financing activities for the six months ended June 30, 2025 included changes in the net obligations for funds held on the behalf of customers of $190.9 million and proceeds from the exercise of stock options of $0.3 million offset by $10.0 million of cash used for the unscheduled repayment of the term loan principal, $2.3 million of cash used to purchase shares withheld for taxes and $0.8 million for payments of deferred consideration. The net cash provided by financing activities for the six months ended June 30, 2024 included changes in the net obligations for funds held on the behalf of customers of $40.9 million, and borrowings under the 2024 Credit Agreement net of issue discounts of $830.2 million, offset by $661.9 million of cash used for the repayment of the principal of the 2021 Credit Agreement and debt issuance and modification costs related to the refinancing, $167.8 million related to the redemption of senior preferred stock and accumulated unpaid dividend, $2.1 million for the redemption of redeemable NCI in subsidiary, $16.4 million of cash dividends paid to redeemable senior preferred stockholders, $0.6 million of cash used for shares withheld for taxes and $4.2 million of payments of contingent/deferred consideration. Long-term Debt As of June 30, 2025, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $935.5 million, compared to $945.5 million at December 31, 2024, resulting in a decrease of $10.0 million . The decrease is related to an unscheduled principal payment. The debt balance at June 30, 2025 consisted of $935.5 million outstanding under the term facility offset by $14.3 million of unamortized debt discounts and issuance costs. Minimum amortization of the term facility are equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal, with the balance paid upon maturity. The term facility matures on May 16, 2031 and the revolving credit facility matures on May 16, 2029. The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases. If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt less unrestricted cash to consolidated adjusted EBITDA (as defined in the Credit Agreement). If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.90:1.00 at each fiscal quarter ended September 30, 2024 through December 31, 2025; 2) 6.40:1.00 at each fiscal quarter ended March 31, 2026 and each fiscal quarter thereafter. As of June 30, 2025, the Company was in compliance with the covenants in the 2024 Credit Agreement. Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that may affect our current and/or future financial statements. See Note 1, Basis of Presentation and Significant Accounting Policies , to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of recently issued accounting pronouncements not yet adopted. Item 3. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2024. Our exposures to market risk have not changed materially since December 31, 2024. 38